Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

The PERA Board of Trustees gathered at PERA’s offices in Denver on Friday, January 17 for its first regularly scheduled meeting of 2025.



The meeting consisted of important updates and discussions about legislation, strategic planning, actuarial assumptions, and more.



<h4 class="wp-block-heading">Legislative update</h4>



Director of Public &amp; Government Affairs Michael Steppat and CEO/Executive Director Andrew Roth led the Board in a discussion about the legislative session and PERA-related bills, including two that have been introduced so far.



The first, <a href="https://leg.colorado.gov/bills/hb25-1052" target="_blank" rel="noreferrer noopener">House Bill 1052</a>, is identical to a&nbsp;bill from last session&nbsp;that would provide a temporary tax credit for PERA retirees to reduce the impact of inflation. The second, <a href="https://leg.colorado.gov/bills/sb25-028" target="_blank" rel="noreferrer noopener">Senate Bill 28</a>, would codify into state law certain reporting practices the PERA Board already performs on a regular basis and would modify the cadence of those reports.



READ MORE: <a href="https://www.copera.org/pera-on-the-issues/2025-proposed-pera-related-legislation-status" target="_blank" rel="noreferrer noopener">2025 Proposed PERA-Related Legislation Status</a>



Steppat also addressed Governor Jared Polis’ proposed “conversion” of Pinnacol Assurance, which is currently the State’s workers’ compensation insurer. That conversion would carry implications for PERA, since Pinnacol employees are currently PERA members and Pinnacol would have to disaffiliate from PERA if it were to become a private entity. The Governor’s proposal also calls for using proceeds from the conversion to offset the State’s annual $225 million direct distribution to PERA.



PERA CEO/Executive Director Andrew Roth concluded by providing an update on the Social Security Fairness Act, which President Joe Biden recently <a href="https://www.copera.org/pera-on-the-issues/president-biden-signs-wep-gpo-repeal-bill-into-law" target="_blank" rel="noreferrer noopener">signed into law</a>. The bill repeals Social Security’s Windfall Elimination Provision and Government Pension Offset, two provisions that reduced Social Security benefits for some PERA members. Roth said he expects it will take some time for the Social Security Administration to release details about how the bill will be implemented. Visit <a href="https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html" target="_blank" rel="noreferrer noopener">ssa.gov</a> for the latest information.



<h4 class="wp-block-heading">Rules hearing</h4>



PERA’s legal team joined the Board to conduct a hearing on proposed changes to rules that govern some PERA benefit provisions. The Board and staff periodically review those rules to ensure they’re up to date, clarifying processes and procedures and updating language to reflect legislative changes.



Changes approved in this rule hearing included:



<ul>
<li>Removing the list of PERA-affiliated employers from PERA Rules, as this list is <a href="https://copera.org/employers/affiliating-with-pera/affiliated-employers" target="_blank" rel="noreferrer noopener">posted and regularly updated online</a>.</li>



<li>Clarifying that designations of beneficiaries, cobeneficiaries and coannuitants can be made electronically.</li>



<li>Updating rules for <a href="https://copera.org/working-after-retirement/" target="_blank" rel="noreferrer noopener">working after retirement</a> to align with recently passed legislation.</li>
</ul>







The full text of proposed changes is <a href="https://content.copera.org/wp-content/uploads/2024/12/PERARules-Redline-12-17-24.pdf" target="_blank" rel="noreferrer noopener">available online</a>.



<h4 class="wp-block-heading">Strategic plan update</h4>



The Board continues to work on drafting PERA’s next strategic plan. During the meeting, Trustees reviewed the draft plan and provided feedback.



Incorporating feedback from previous discussions and work sessions, the draft plan sorts PERA’s strategic objectives into three main goals:



<ul>
<li>Financial stability: Strengthening PERA’s long-term financial health</li>



<li>Customer/stakeholder experience: Serving as a trusted partner to members and stakeholders</li>



<li>Organizational excellence and modernization: Creating value through high performance and strong governance</li>
</ul>







The Board is expected to sign off on the final version of the plan at its March meeting, after which PERA staff will begin the work of implementing and executing the plan.



<h4 class="wp-block-heading">Actuarial experience study results</h4>



For several months the Board’s actuarial consultant, Segal, has been conducting what’s known as an experience study. That analysis involves comparing current actuarial assumptions—factors such as expected investment returns, price inflation, payroll growth, and life expectancy—to the economic outcomes and member behaviors experienced over the past several years. That process, which takes place every few years, ensures PERA has an accurate picture of its financial health.



As a result of the study, Segal recommended adjustments to some demographic assumptions and the Board voted to adopt those recommendations for the 2024 Annual Comprehensive Financial Report, which will be released in June.



READ MORE: <a href="https://copera.org/pera-on-the-issues/actuarial-experience-study-refining-the-financial-view-of-the-future" target="_blank" rel="noreferrer noopener">Actuarial Experience Study: Refining the Financial View of the Future</a>



<h4 class="wp-block-heading">Update on legacy modernization initiative</h4>



One of the final agenda items was an update from CEO/Executive Director Andrew Roth. Roth discussed the long-term initiative to <a href="https://www.copera.org/news/colorado-pera-board-approves-increase-in-operating-budget-to-fund-technology-upgrades" target="_blank" rel="noreferrer noopener">modernize the core technology systems</a> used to administer benefits—a major project that is expected to take multiple years to complete.



Roth said the project is still in the beginning stages with staff conducting preparatory work, including data cleanup, staff development, and business process improvements. Roth will continue to provide the Board with updates on this major initiative as it moves forward in the coming months and years.



The Board’s next scheduled meeting is set for March 14.



Learn more at <a href="https://www.copera.org/board-and-leadership" target="_blank" rel="noreferrer noopener">copera.org/board-and-leadership</a>.

Recap of PERA Board’s January 2025 Meeting

The Colorado PERA Board of Trustees has wrapped up work on an important periodic study that helps ensure better accuracy of PERA’s financial calculations.



Known as an actuarial experience study, the analysis gives retirement plans like PERA a periodic refinement or more accurate picture of their financial health and future obligations.



<h4 class="wp-block-heading">Planning for the future</h4>



PERA is in the business of providing retirement benefits for as long as a person lives, and that presents a unique challenge: Making sure we have an accurate sense of how much it will cost to pay those benefits over several decades and beyond.



Because a retiree’s benefit in the PERA Defined Benefit Plan is based on their age, years of service, and salary history, we need to be able to predict how certain factors will change over time, such as:



<ul>
<li>Expected lifespan of the retiree population</li>



<li>Expected pay increase patterns over the career of active members</li>



<li>Typical ages at which active members retire</li>



<li>Expected annual investment return, in the long-term</li>



<li>Expected change in the value of a dollar (rate of inflation)</li>
</ul>







Those factors are referred to as actuarial assumptions, and they’re grouped into either economic assumptions (inflation and investment returns) or demographic assumptions (rates of mortality and retirement). Together, the assumptions play a key role in the calculations PERA conducts every year as reported in its actuarial valuations and <a href="https://copera.org/annual-report" target="_blank" rel="noreferrer noopener">Annual Comprehensive Financial Report</a>.



RELATED: <a href="https://www.copera.org/pera-on-the-issues/explaining-the-role-of-actuaries-in-retirement-plans-like-pera" target="_blank" rel="noreferrer noopener">Explaining the Role of Actuaries in Retirement Plans Like PERA</a>



The process of reviewing and refining actuarial assumptions is known as an experience study, so called because it involves comparing the assumptions with what actually happened over a set period of time. For example, if wage growth is much different than expected during the period of study, some adjustments to that assumption are likely needed going forward.



PERA typically conducts an actuarial experience study every four years. This year’s experience study offered additional challenges because the period studied, from January 1, 2020, to December 31, 2023, encompassed effects of the COVID-19 pandemic. Special consideration was needed to ensure the higher mortality and greater number of unreduced retirements were not inappropriately reflected within the revised assumptions.



<h4 class="wp-block-heading">Experience study results</h4>



The PERA Board’s actuarial consultant, Segal, conducted the experience study and provided the Board with recommendations for adjustments to various assumptions as a result.



Segal recommended the following adjustments to demographic assumptions:



<ul>
<li>Salary scale assumptions were altered to better reflect actual recent experience.</li>



<li>Assumed rates of termination, retirement, and disability were revised to more closely reflect actual experience.</li>



<li>Mortality base tables were retained with revised adjustments for credibility and gender, where applicable, and the applied generational projection scale was updated for all groups.</li>



<li>Administrative expense load was increased from 0.40% to 0.45%, as a percentage of covered payroll.</li>



<li>Assumed annual membership growth (for projection purposes only) was decreased for the School, Local Government, and DPS Divisions.</li>



<li>Assumed rates of PERACare participation for both Health Care Trust Funds were reduced to better reflect actual recent experience.</li>
</ul>







Segal recommended retention of the current economic assumptions, including the long-term expected rate of return (7.25%), price inflation (2.3%), and wage inflation (3.0%).



The Board voted unanimously to adopt all recommendations for the five Division Trust Funds and the two Health Care Trust Funds.



<h4 class="wp-block-heading">What the changes mean</h4>



First and foremost, changes in PERA’s actuarial assumptions do not affect the payment of retirement benefits. If you’re a PERA retiree, you’ll continue to receive your monthly benefit payments as expected, and working members can count on PERA providing benefits when they retire.



The main impact of the experience study is on PERA’s current and projected liabilities—which help determine how much money PERA will need to have on hand to pay benefits for its members.



The recent experience review noted over the period studied, that certain assumptions resulted in liability gains while others resulted in liability losses. However, the net result was an actuarial loss overall—meaning, the revised assumptions will likely result in a negative effect on PERA’s funding status.



The exact impact of the updated assumptions won’t be clear until the release of the Annual Comprehensive Financial Report (ACFR), as that will be the first time the revised assumptions are incorporated into PERA’s annual valuation process—assessing plan liabilities and other important actuarial metrics.



The 2024 ACFR will be available following the PERA Board’s June 27, 2025, meeting.

Actuarial Experience Study: Refining the Financial View of the Future

The Colorado PERA Board of Trustees convened for its final regular meeting of 2024 on Friday, November 15.



Below are summaries of some of the key actions the Board took during the meeting. You may also view a <a href="https://www.youtube.com/live/PEsqqE25_w0?feature=share" target="_blank" rel="noreferrer noopener">recorded livestream</a> of the meeting.



<h4 class="wp-block-heading">PERA operating budget</h4>



Following a budget workshop during which PERA executives briefed the Board on the need for a larger budget to cover important technology upgrades, the Board approved PERA’s 2025 operating budget of $132 million. The 19.6% increase over 2024’s budget includes costs associated with a multi-year project to modernize the core technology systems necessary to administer benefits as well as other critical needs.



Read more about <a href="https://www.copera.org/news/colorado-pera-board-approves-increase-in-operating-budget-to-fund-technology-upgrades" target="_blank" rel="noreferrer noopener">PERA’s 2025 budget</a>.



<h4 class="wp-block-heading">Strategic planning update</h4>



For months now, the Board, PERA staff, and consultants have been working together to develop PERA’s next three-year strategic plan. That process has involved stakeholder research, identifying areas of strength and opportunity, and solidifying long-term priorities and goals for the organization.



From here, work will continue on crafting the plan, with a draft expected to be ready for Board review in January. Once approved, it will be up to staff to begin implementing the plan and fulfilling its strategic vision.



<h4 class="wp-block-heading">Member contribution interest rate</h4>



Every PERA Defined Benefit Plan account accrues interest, compounded annually. If a PERA member <a href="https://copera.org/welcome-pera-members/life-and-job-changes/leaving-employment" target="_blank" rel="noreferrer noopener">leaves PERA-covered employment</a> and requests a refund of their account, they receive their contributions, the interest earned on that balance, and any applicable employer match. If that member keeps their account with PERA, the balance will continue to accrue interest and the member has multiple options upon reaching retirement eligibility, including choosing a lifetime monthly benefit.



The Board is responsible for setting the interest rate every year; it currently stands at 3 percent. The Board’s policy evaluates the interest rate as a component of members’ overall retirement benefit. After discussing the issue, Trustees voted to keep the interest rate at 3 percent for 2025.



<h4 class="wp-block-heading">Trustee appointment and Board officer election</h4>



The Board held elections to name a new Chair and Vice Chair, as terms for current Chair Marcus Pennell and Vice Chair Taylor McLemore are set to expire. Current Vice Chair Taylor McLemore was elected Chair, and the Hon. Rebecca R. Freyre was elected Vice Chair. Outgoing Chair Marcus Pennell served the limit of two terms as Chair and was ineligible for reelection.



Both McLemore and Freyre will serve two-year terms.



In addition to electing new officers, the Board appointed Dr. Louis Fletcher to fill a School Division seat vacated by Trustee Scott Smith in September. Fletcher had the second-highest number of votes in the 2024 election for that seat, and will serve until the next election in 2025.



READ MORE: <a href="https://www.copera.org/news/pera-board-elects-new-chair-vice-chair" target="_blank" rel="noreferrer noopener">PERA Board Elects New Chair, Vice Chair</a>



<h4 class="wp-block-heading">Denver Public Schools “true-up” discussion</h4>



When legislation was passed to merge Denver Public Schools Retirement System into Colorado PERA in 2010, it included a provision that aims to equalize the ratio of unfunded actuarial accrued liability over payroll of the DPS Division and the School Division in 30 years. Every five years, PERA conducts an analysis of those ratios and whether adjustments to the DPS Division employer contribution rate would be needed to stay on track.



The results show that a reduction in the DPS Division’s employer contribution rate would be necessary to equalize this ratio in 2039, but the PERA Board has previously taken a formal stance in opposition to the defunding provisions—such as the 5-year “true-up”—that were included in the merger legislation, and more recently has opposed any legislation seeking to reduce contributions pursuant to the Board&#8217;s funding policy.



Additionally, a reduction in employer contributions from the DPS Division could increase the possibility of triggering the Automatic Adjustment Provision in future years, which could increase contributions in other divisions and further decrease the Annual Increase retirees receive on their retirement benefit.



<h4 class="wp-block-heading">Upcoming legislative session</h4>



Director of Public &amp; Government Affairs Michael Steppat and Chief Executive Officer/Executive Director Andrew Roth provided the Trustees with an update on interim legislative activity and PERA-related bills that could be introduced in the upcoming 2025 legislative session.



The&nbsp;<a href="https://leg.colorado.gov/committees/pension-review-commission/2024-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Commission</a>, which is responsible for recommending legislation pertaining to PERA and the Fire and Police Pension Association of Colorado, drafted two bills for the 2025 session.



The first, known as Bill A, is similar to a bill from last session that would provide a temporary tax credit for PERA retirees to reduce the impact of inflation. The second draft, Bill B, pertains to PERA studies and reporting and aims to lay out in statute some of the work the PERA Board already does on a regular basis and modify the cadence of those reports.



READ MORE: <a href="https://www.copera.org/pera-on-the-issues/state-lawmakers-pursuing-two-pera-related-bills-in-2025" target="_blank" rel="noreferrer noopener">State Lawmakers Pursuing Two PERA-Related Bills in 2025</a>



<h4 class="wp-block-heading">Actuarial experience study</h4>



In order to accurately estimate PERA’s financial status and how much money is needed to provide benefits now and into the future, we use a set of predictions, known as actuarial assumptions, that undergo regular review and updates as needed. Those assumptions include economic factors like inflation, investment returns and payroll growth, as well as demographic assumptions such as when people retire and how long they’ll live.



The process of reviewing those assumptions is known as an actuarial experience study, so called because the study involves comparing PERA’s assumptions with the actual experience over a set time period. The last experience study <a href="https://www.copera.org/pera-on-the-issues/2020-experience-study-preparing-for-a-secure-future" target="_blank" rel="noreferrer noopener">took place in 2020</a>. While nobody can predict the future perfectly, regularly performing experience studies ensures our estimates of current and future benefit obligations are as accurate as possible.



The current experience study will look at the period between January 1, 2020 and December 31, 2023. This is an important period because it will show the effects of the COVID-19 pandemic, such as higher mortality and earlier retirements.



Over the coming months, PERA staff will continue working with actuarial consultants to conduct the study, after which the consultants may recommend changes to some assumptions. If the Board adopts any recommended changes, we’ll be sure to provide an update on what that might mean for PERA’s finances.



<h4 class="wp-block-heading">2025 Board election</h4>



The Board’s final action item was approving the calendar for next year’s Board election.



There will be five seats up for election in 2025: Three active member seats in the School Division, one active member seat in the State Division (excluding higher-education employers), and one retiree seat (School, Local Government, and Judicial Divisions only). Candidacy will open in early January, with the election taking place in May.



New in 2025, members and retirees will have the added option of being able to cast their votes via the Colorado PERA <a href="https://www.copera.org/pera-mobile-app" target="_blank" rel="noreferrer noopener">mobile app</a> or on copera.org, in addition to the option to vote by mail.



The Board’s next regularly scheduled meeting will take place on January 17, 2025.

PERA Board Approves Budget, Member Interest Rate and More at November 2024 Meeting

Key points from the story:



<ul><li>PERA plans for the long term by projecting how income, assets, and costs will change over time.</li><li>The Board sets actuarial assumptions, which are the underlying factors that affect these projections.</li><li>Every four years, the Board reviews the actuarial assumptions it uses with something called an experience study.</li><li>The Board completed this work in November.</li></ul>



<hr class="wp-block-separator"/>



Imagine you were asked to make a budget. Not just for this year but for the next 30. You know your income today, but you’d need to estimate how much you’ll be making one, two, three decades from now. You’d need to estimate the price of groceries and gas will change. You’d need to project how what you spend your money on changes over time—maybe childcare expenses go down but medical expenses go up.



PERA is in the business of thinking about the long term, too. A 35-year-old PERA member trusts that the contributions sent to PERA today are building a secure retirement 30 years down the line. So how does PERA go about planning for 2050?



<h5 class="wp-block-heading">Budgeting for the Future at PERA</h5>



PERA isn’t exactly creating a household budget, but the analogy is a good place to start.



Instead of income, PERA must project how contributions change over time as staffing levels and salaries fluctuate. It must consider what investment returns to expect over the long term and the many ways in which the long-term interest rate has an impact.



And instead of expenses like gas and groceries, PERA must project the amount retirees—both current and future—will receive during their retirements. 



This might seem like a straightforward task, but it&#8217;s not. Because members and cobeneficiaries can’t outlive their pension, the amount they receive is tied to their lifespan. So PERA must project how long retirees live. Because the amount a member receives depends on length of service, salary, and age, PERA must project how these factors will change as well.



The cost of paying these benefits to current and future retirees is called PERA’s liability. It isn’t all due at once—that 35-year-old still has a few decades before collecting a pension—but it still counts as a liability today.



Calculating these figures far into the future is the first step in sound financial planning.



<h5 class="wp-block-heading">The Language of the Future</h5>



PERA plans for these future changes and conditions using something called actuarial assumptions.



Actuarial assumptions are grouped into two categories—economic and demographic. Economic assumptions include information like inflation, salary increases, and the projected growth in the number of employees hired by PERA employers. Demographic assumptions include information like the ages at which PERA members retire and how long people tend to live.



While most assumptions deal with factors outside PERA’s control, understanding them is essential.



<h5 class="wp-block-heading">Comparing Assumptions to Experience</h5>



Setting actuarial assumptions is not a one-time event. PERA’s Board regularly reviews actuarial assumptions using something called an experience study.



“The Board’s responsibility to set the actuarial assumptions of the plan is a task that’s very important,” said Ron Baker, PERA’s Executive Director. “This is a critical step to make sure PERA is accurately measuring and reporting on our financial status, and that’s a responsibility the PERA Board takes very seriously.”



An experience study compares what actually happened over the last few years against what PERA projected would happen. The Board can then adjust the assumptions PERA will use for the next four years. This rigorous review process keeps projections as accurate as possible. This process is an industry best practice for all pension systems.



PERA’s liability changes when an actuarial assumption changes. It’s as if the person making a household budget for the next 30 years determined that health care would likely cost a different amount in 2050 than originally planned and adjusted his or her retirement plan accordingly. Although those aren’t bills that need to be paid today, having a clearer goal of what those bills will be in the future makes it easier to prepare for when they do come due.



<h5 class="wp-block-heading">2020 Experience Study</h5>



At its November meeting, the Board reviewed the 2020 experience study conducted by their actuarial consultant (Segal) and voted to adopt the recommendations made by Segal on the assumptions PERA will use going forward.



Changes to assumptions include:



<ul><li>Lowering the inflation assumption from 2.4% to 2.3%</li><li>Lowering the payroll growth rate assumption from 3.50% to 3.00%</li><li>Lowering the active member growth assumption for each division. Current growth assumptions range from 1.00% to 1.25%. Recommended growth assumptions range from 0.25% to 1.00%.</li><li>A number of changes to the mortality assumptions.</li></ul>



Assumptions that didn’t change include:



<ul><li>Maintaining the investment return assumption of 7.25%</li><li>Maintaining the administrative expenses assumption of 0.40% of payroll</li></ul>



<h5 class="wp-block-heading">Using New Assumptions</h5>



The actuarial assumptions adopted have an effect on a number of calculations performed by PERA. For example, the calculations for reduced (early) retirement and the cost of purchasing service credit use these assumptions. Those calculations use factors, like longevity, that change when assumptions change.



The benefit checks that current retirees receive are not an actuarial assumption. Retirees won’t see any change to their monthly benefit because of the experience study.



These assumptions will also be used in the 2020 Comprehensive Annual Financial Report, which will be released in June 2021. This report contains a calculation of PERA’s liabilities using the actuarial assumptions adopted by the Board.



The ultimate goal of the experience study is to provide the most accurate portrait of the future possible. The routine and rigorous examination of this portrait enables PERA to prepare for the future and to provide retirement security for all of its members.

Tag Archives:

Recap of PERA Board’s January 2025 Meeting

Actuarial Experience Study: Refining the Financial View of the Future

PERA Board Approves Budget, Member Interest Rate and More at November 2024 Meeting

2020 Experience Study: Preparing for a Secure Future

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